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The pros and cons of pre-nups

View profile for Mike Devlin
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This column was first published in the Wigan Observer on the 11th March 2014

Q: My partner and I are set to marry later this year; however, I have inheritance I would like to protect if our marriage was to end in divorce. Should we consider entering into a pre-nuptial agreement?

A: With statistics suggesting over 40 per cent of marriages end in divorce, it’s no surprise that an increasing number of people are considering a pre-nuptial agreement before they tie the knot. Pre-nuptial agreements are popular in other parts of the world such as America and Australia, as well as wider Europe which is now influencing UK courts, but there are  misconceptions which have until comparatively recently held back their wider use by UK couples until now.

Introduction of the Civil Partnership Act regulated unions of same-sex couples, giving them the same property, pension and income rights as married couples and has perhaps speeded up the adoption of such agreements, it being recognised they were a useful tool to offset the implications of the courts ability to make much wider financial provision for same-sex couples than had previously been the case. Combined with the fact that those taking early advantage of the Act were perhaps more financially established and having assets to protect, and co-habiting couples of both sexes perhaps having been more used to utilising Living Together ( or Co-habitation ) Agreements, has encouraged uptake. The question then follows if same-sex couples can take advantage of such agreements, why can’t couples of the opposite sex

A pre-nuptial agreement (pre-nup) is a formal contract that is entered into before a couple are set to marry. The contract outlines how they would wish to divide their assets if their relationship was to end. Any couple entering marriage or a civil partnership can make a pre-nup which can provide for arrangements such as financial support for children from prior marriages, keeping inherited or pre-acquired assets “ring-fenced” in the event of a subsequent divorce or dissolution, or even protecting a family trust. A similar agreement after marriage, called a post-nuptial agreement, can also take account of any subsequent changes in personal circumstances.

If a couple do not enter into such an agreement then there can be uncertainty as to how family finances maybe dealt with upon dissolution with the court having a wide discretion in how finances should be sorted. To assist in exercising that discretion the court has to have regard to the “Section 25 criteria” set out in the Matrimonial Causes Act 1973, which are effectively replicated in the Civil Partnership Act. Any decision must have regard to “the income, earning capacity, property and other financial resources which each of the parties has or is likely to have in the foreseeable future” as well as each parties needs, the standard of living enjoyed by the family before the breakdown of the marriage, the age of each party, any disabilities, any contributions either may have made, conduct (in limited cases) and any loss of potential benefits such as pension rights, consideration must be given to the welfare of any child of the family who has not yet attained the age of 18, although this is not the overriding consideration.

As the current law stands, pre-nups are just one of the considerations within the courts general duty to have regard to all the circumstances of the case, when the court will decide if any such agreement is “fair” and should bind the parties. Presently, there is no guarantee that they will be.

In recent years judges are increasingly willing to uphold pre-nups as evidence of a couple’s intentions before the marriage, although just within the last week or so the High Court has ordered a property to be purchased by a wealthy wife, having decided insufficient provision had been made for a husband in the pre-nup.

A recent proposal from the Law Commission includes a draft bill for consideration by Parliament to make qualifying agreements binding in the UK, being those made at least 28 days prior to the marriage or civil partnership, with both partners have to divulge information on their finances and both partners needs to have received professional legal advice. The theory is that the new law will make it easier and cheaper for couples to handle their finances if they separate because of the certainty they provide. However, there will need to be safeguards to protect vulnerable individuals who may be reluctant to upset a prospective spouse prior to marriage and simply go along with what is proposed, with limited consideration of future needs.

What enforceability may do is emphasise to couples the powers of the court in determining financial issues right from the outset, as opposed to now where relatively few take the opportunity of seeking advice before marriage and instead wait until it is “too late” when separation actually occurs.

 

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